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A trial underway in a federal court in San Francisco could have a big impact on whether
gig workers are classified as employees or independent contractors (
Lawson v. GrubHub Holdings, Inc.
, N.D. Cal., No. 3:15-cv-05128, trial
9/11/17
).

Former GrubHub food delivery driver Raef Lawson says he was an employee and the company
owes him overtime and reimbursement for business expenses that he’d be entitled to
under California law if he had been classified correctly. Lawson provided provided
delivery services for five months beginning in October 2015. He also wants to represent
other drivers in a class action against the company.

But GrubHub argued at trial that it just connects customers with restaurants and,
to a smaller extent, with delivery drivers. Lawson had control over how he provided
deliveries, such as the hours he worked and the packaging he used for transporting
items, the company argued at trial.

The outcome “will be closely watched and could have a ripple effect” on similar companies,
Shannon Liss-Riordan, a lawyer for Lawson, told Bloomberg BNA. Lawsuits alleging misclassification
of workers by other on-demand companies, such as Uber Technologies Inc. and Postmates
Inc., have ended in settlements. Lawson’s is the first to reach trial.

Lawson is trying to represent other California GrubHub drivers who say they were misclassified,
although this phase of the trial focuses only on whether he was misclassified. If
he prevails on this issue, a later phase will decide whether he can make the misclassification
claim on behalf of other drivers.

Evidence in the first phase wrapped up last week. The parties will submit post-trial
briefs and appear for closing arguments for this phase Oct. 30, before Magistrate
Judge Jacqueline Scott Corley in the U.S. District Court for the Northern District
of California. She could rule at any time afterward.

San Francisco Is Gig-Economy Central

In one sense, the impact will be limited. A federal district court doesn’t create
precedent the way a court of appeals does. But a ruling that Lawson is an employee
could still have far-reaching reverberations, especially given where it’s happening.

“It would be cited as at least being persuasive,” Ian Schaefer, a member of Epstein
Becker & Green P.C., in the law firm’s employment, labor, and workforce management
practice, told Bloomberg BNA. “This is the heart of the gig economy in California.
I think it would have instructive effect and an impact on litigation and the arguments
of litigants going forward.”

“There’s this concept that the gig economy is startup companies where everybody is
engaged as a contractor, and it’s on demand, and it’s all app-based,” Schaefer said.

“The reality is that everyone’s operating in a gig economy, every company,” he said.
Schaefer co-leads Epstein Becker’s technology, media, and telecommunications service
team and is co-editor of its Technology Employment Law blog.

“It’s not new—we’ve had temp agencies for 50 years—but the lines between traditional
employee and more flexible employee are becoming more blurred,” Schaefer said. “The
gig economy affects not just emerging companies in Silicon Valley, but it affects
Fortune 100 companies equally.”

Lawson’s lawyer took issue with the company’s argument that all it did was connect
customers looking to pay for food delivery with drivers willing to provide it. “Contingent
work is not new, nor is it new for companies to claim they are just connecting customers
with workers,” Liss-Riordan told Bloomberg BNA. “That’s called an employer.”

Although Lawson theoretically could sign up for whichever shifts he wanted, the company
reserved slots during more lucrative times for drivers who completed deliveries in
shorter times, he said. It encouraged drivers to wear clothing and use materials that
carried GrubHub branding by cutting rental fees if they wore GrubHub-branded clothing,
he said.

Who’s in the Driver’s Seat?

“Raef Lawson took full advantage of the freedom and flexibility that his partnership
with Grubhub afforded him by deciding when, where and how frequently he performed
deliveries,” the company said in a statement emailed to Bloomberg BNA. “Grubhub believes
that Delivery Service Partners value and benefit immensely from this type of independence,
and it is often the reason they choose to partner with Grubhub in the first place.”

Linda Donahue, who briefs policy makers on classification issues, weighed in on the
subject as well.

“If it is simply an app that connects someone in need of the service to someone who’s
willing to provide that service, that’s one thing,” said Donahue, associate director
of government relations at the School of Industrial and Labor Relations at Cornell
University.

“If GrubHub is determining who has access to the work at hand then they’re controlling
the scheduling of work,” she told Bloomberg BNA. “They’re controlling who has access
to the work. They’re controlling what hours someone works.”

Controlling who receives access to work is a sign of an employee relationship, Donahue
said. “If you’re an employee then your employer is entitled to give you work or not
give you work because they’re the employer,” she said. “If you’re an independent contractor
and there’s work available but you’re being denied access to it, that’s a different
story.”

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